March 17th 2000
said, "Baby what's the going price",
She told me to go to hell...
it a shame,
To be shot down in flames." -
AC/DC, Shot Down In Flames
year about this time, North Americans (usually male) get
excited about college basketball teams that they have
never heard of. The
office and online pools are a massive guessing game
because there are always upsets in the 64 team, single
This means that the person that follows college
hoops the closest never wins the pool.
they won't pick the underdogs.
They go by the numbers, analyze the styles of
play and make well-educated prognostications. My pool was won a few years back by a woman who picked the
winners by what colours their shirts were.
If she liked the colour, she chose the team. She
really liked navy blue with gold trim and that was the
year ('89 I think) that Michigan won it.
I kid you not.
is not a convenient segue to discuss chaos theory and
how it applies to college basketball tournaments.
And I'm not going to tell you who I picked this
year (OK, Michigan State over Duke in the final).
I am going to tell you about a particular
March Madness, this year's technology investment
climate and it has a sports theme.
heard of Bre-X? A
little fallout from this debacle is pending legislation
that makes an investment outfit liable for any public
comments it makes regarding a company. Analyst, investment banker, secretary, doesn't matter.
If it is made public, it will put the firm on the
is not the law of the land yet, but it should be, given
the page and a half of utter drivel that was in the
weekend Vancouver Sun two weeks ago about a public
company called Book4golf.com
company had a market cap at the time of CDN$500 M based
on the $15 per share price.
The company has an interesting business plan to
allow anyone to book tee times on any course in North
America through one site.
As I understand it, they will make money in the
transaction of the booking and from advertising and
cross promotion on the site with golf related companies.
The site has a large database of golf sites with
scorecards and maps of a lot of them.
Public golf is big business.
Booking tee times is a pain for consumers and a
single interface makes sense for them.
But how many courses have Internet access at the
pro shop desk? More
in the future, I bet.
But not many now.
Wireless delivery of bookings probably makes more
sense, but I digress.
the article has Yorkton president Scotty Paterson
declaring that this company will be huge. They will
dominate the market and have already signed up many
major golf clubs to use their system.
Then he blurts out that the shares will go to
about your potential liability!
This company will be worth 20x what it is today,
he says. If Scotty's comment was meant to be a massive
tee shot down the middle of the fairway, I see it as
more of a duck hook into the woods, out of bounds.
what the very last paragraph mentioned in the 2000+ word
The site won't book tee times until at least
April, possibly not for 8 more months according to
sources in the article.
Seems they haven't built the tee time engine
Yorkton is a great Canadian story in investment banking.
They have carved a good niche in technology and
have been involved in many of the successful Canadian
technology stories that you have heard of.
But this is truly madness.
Book4golf.com needs 8 more months to finish their
an eternity in the E-Commerce world of today.
I'm willing to bet that there is a team out
there that could build what they need in less than 8
also willing to bet that someone already has built what
they need. Who,
you ask? How
about Eteetime.com, which has over 110,000 tee times
available every day.
Book4golf.com should look up any of the 18 other on-line
tee time companies on Yahoo (http://dir.yahoo.com/Business_and_
and see if they have some technology that they could
haven't you heard of Eteetime.com?
Because they are privately held, VC backed and
building business alliances as fast or faster than
Book4golf.com, without a president of an investment bank
saying that they will be worth $10 Billion soon. Is
Eteetime.com worth $500M just because Canadian investors
think Book4golf.com is worth that much in a public
I was the CEO of Eteetime.com, I would be arguing that I
am worth more. Did
the recent backers of Eteetime.com invest money in them
at such a high valuation?
I think not. Probably at less than 1/10th
of that value. So
is Eteetime.com stupid for not getting such an enormous
value through the public market or is Book4golf.com
Probably a toss up in the short term.
Let's ask the question again in 6 months..
the kicker.. some people just invested in Book4golf.com
at $15 a share ($500M valuation).
They raised $20M in a private placement, brokered
by (let's see if you can guess who..) Yorkton.
The stock is at $12.70 today on the CDNX.
If Eteetime.com was doing a round of financing
and you had the choice to invest, would you pay $15 a
share or possibly 10 x less for a company that seems to
be ahead of the more expensive one.
Am I being clear enough here?
look at the positives for Book4golf.com.
They raised money at a high valuation, so the
founders and earlier shareholders own more of the
Bully for them.
They have promotion out the ying-yang and so
awareness is growing in the golfing community (as well
as the CDNX investing community).
Many people will be driven to their site.
Now here's the bad news.
The people that go to book a tee time at their
site can't. Maybe
not for another 8 months.
A competitor has market traction with similar
alliances and a working site.
They have almost as much money in the bank (of
course, the founders hold relatively less of the
Book4golf.com's stock price dives in the next little
while, the recent buyers of $15 shares will not invest
again when the company needs more money.
They will be very unhappy.
the danger of placing a $500M valuation on a very early
stage company in a market where there is no inherent
At that level of value, they should be raising
$100M to really market this thing, but that's only
possible when you are pre-IPO and the private
institutional investors can see the lift of that IPO
around the corner.
Look at the last 24 months of private, pre-IPO
investing in e-commerce companies and you will see that
trend very clearly.
Want a comparable? Onvia.com raised its pre-IPO
round of US $48M at a valuation of roughly US$250M,
about $75M less than Book4golf.com.
promise not to get on my soapbox and praise the virtues
of staying private to raise your money and grow your
company, at least until the stage that users can
actually transact business with you. Oops, too late. But I had to vent this story for a variety of other reasons:
This is symptomatic of "inmates running the
asylum" scenarios at the top end of a bull market.
The dangerous and wild predictions of the
investment bank here are only going to hurt innocent
individual investors, much like the truckloads of gold
story of two short years ago.
Private companies and their investors set the
price for investment based on mutual negotiation.
Its in both parties interest to keep in mind the
next source of money so as not to achieve a too lofty
value and have no one else invest, orphaning the
Once you sell product, huge overvaluation in a
public company is de rigeur these days.
I have no problem with that.
Itís the company that has no product and needs
strategic investment partners that gets hurt when it is
I just want to protect myself from eating my shoe at
some future date with this closing:
I think that Book4golf.com is doing all of the
right things, businesswise, in creating their brand,
alliances with key suppliers and partners and in signing
up golf courses. If
it was a company in my portfolio, I would be happy with
their progress to date on those fronts. But
competition is heating up and they have to get the
technology working ASAP.
I guess I just have a problem with an unfinished
product getting overhyped in a public market that
currently lacks reality-based investors.
you buy stocks based on the colour of the company's
if you don't analyze it, you might still win.
Don't need to listen to the "expert", do
March, after all.
From Last Week
you dare call a decent hard working man like Ramsey a
true he would drive a peanut stand bankrupt in first
hour of operation but he is a decent man!!
was wondering if you get a lot of flame? I think would
be interesting to post the most representative you get
for each column under "best flame from last
article" or something like that, providing
un-altered text and email of originator (I'm not
original, some sites do that, it's really entertaining)
would be fun huh??
have received a few "disagreements" in my time, but
only one true flame.
Because I printed the flame, and the guy looked
like a bit of a fool, he got very angry with me and
asked that it be removed.
I am expecting a few letters this week, as I
delve into a particular company and its situation.
Stay tuned next time for some action, I hope.
actually expected a few more responses about the
taxes/budget column last time.
I guess everyone was pretty much in agreement.
apologize to a couple of writers that sent responses
that I did not print this week.
I'm on the road and I managed to leave them at
was a well-organized rant about the tax situation.
I'll try and print them next time.
What Do You Think? Talk
Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
positive or constructive. I'll keep the flames to
Something Ventured Archive
Online Venture Capital Guide